Fri, Aug 10, 2007 - Page 1 News List

China won't sell assets in absence of dispute: expert

BONDS China would also suffer if the dollar were to plunge, a senior Chinese economist said, after the US president cautioned against forex manipulation


China will not sell off its US dollar assets as long as there is no major disagreement with the US, a researcher at a top government think tank said yesterday.

Zhang Ming (張明), an economist with the Chinese Academy of Social Sciences, made the remark after US President George W. Bush said China would be "foolhardy" to attempt to push down the US dollar in retaliation for US pressure over Beijing's alleged currency manipulation.

"As long as there are no big upheavals in the American economy and there is no serious dispute between China and the United States, the Chinese government will not sell off US dollar assets in any major amounts," Zhang said.

He said that China would stand to lose, too, if the US dollar plunged as a result because an estimated two-thirds of its US$1.3 trillion foreign exchange reserves are tied up in US dollar assets, mostly Treasury bonds.

"Neither China nor the United States would rashly touch the yuan exchange rate," Zhang said.

Bush earlier warned against any attempt by China to hit back at Washington if US lawmakers pressed for sanctions over the yuan when asked to comment on a report that Beijing was considering such a move in Britain's Daily Telegraph newspaper.

"That would be foolhardy of them to do that," Bush said in an interview with Fox News, adding he doubted the report was based on sources from Chinese President Hu Jintao's (胡錦濤) office.

"If that's the ... position of the government, it would be foolhardy for them to do this."

Meanwhile, US Secretary of the Treasury Henry Paulson said on CNBC that suggestions that China was considering selling off US dollar denominated assets to hammer the already weakened US dollar were "absurd."

"We have tensions and we have to deal with tensions on both sides ... but overall, both of our countries are committed to a constructive economic relationships," said Paulson, who returned from talks with top leaders in China last week.

China reportedly holds US$900 billion in a mix of US bonds.

Critics of China in the US say the yuan currency is undervalued by as much as 40 percent, making Chinese exports cheaper.

Some blame the low currency value for the loss of US manufacturing jobs and a US trade deficit with China that hit US$232.5 billion last year, according to Washington's figures.

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